Beginner’s Guide: How much capital do you need to start investing in the stock market?

Gordon B. Johnson

  Stock markets are operated differently across the world, and this information is key to how and what you invest in, hence, the companies to invest in might be regional, national, sectoral (according to industry), or global. Also, there are different types of stock classifications to meet the preferences of […]

6 Stock Market Investing Tips & Guide for Beginners - Checklist

 

Stock markets are operated differently across the world, and this information is key to how and what you invest in, hence, the companies to invest in might be regional, national, sectoral (according to industry), or global. Also, there are different types of stock classifications to meet the preferences of a diversity of investors. There are common stocks and preferred stocks, with categories like income stock, speculative stock, blue-chip stock, defensive stock, growth stocks, value stocks, and income stocks.

There are the stocks that give the investor a share of the profits made by any company invested in, with return on investment (ROI) made through dividends and the appreciation of capital. There are also companies you invest in where you get voting rights, with the number of shares in such a company directly corresponding to the number of votes you possess, like Twitter and Netflix. For the holder of common stocks, the profitability of your investment is dependent on the movement of the share prices. There is the downside to common stock, though. It is important to note that any form of investment is an exercise in risk-taking, and if a company ever goes bankrupt, the holders of common stocks get paid last, after bondholders and preferred stockholders, therefore common stockholders carry the highest risk liability.

On the other hand, the preferred stock does not get the voting rights in the company where their investments are domiciled, but the dividend they receive is usually higher than that available in common stock, and their payments are regular and fixed for precise periods. The predictability of income nonetheless, the con of preferred stock is that the stocks can be bought back by the companies from the investors at any time.

Understanding the types and categories of stocks is the first step in investment. The knowledge will help to determine whether and how to diversify your investment portfolio to meet your preference. To know which companies are viable and have a history of being a quality investment, you might find information from existing customers in reviews websites like US-reviews.

Now that you have a working understanding of stocks, how much exactly do you need to invest in stocks? There are other classifications of investments (that this article cannot possibly address, so you might want to do a little bit more of research to boost your knowledge) and each has its minimum investment requirement. For Hedge Funds, for instance, you averagely require a minimum deposit of $100,000 in a firm to kickstart your investment; while the minimum legal balance for trading day stock in the United States is pegged at $25,000. The idea is to have enough capital to be able to withstand a string of losses, and this is especially important for day trading.

Some minimum investments are set high to discourage short-term investment, while others can be set by brokers or simply the price of purchase. It might be impossible to say for a fact that a particular amount is a minimum across board, especially with the diversity of companies and investment categories available. Ultimately, getting professional advice in line with variables like your choice of company, national or international investments, long-term or short-term investment, etc. will help you make the best choice for the capital at hand.

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